BHP Drops 'Billiton' From Its Name

2017-05-18 01:10:17Leonard Rios

Chief Executive Andrew Mackenzie met Wednesday with representatives from Elliott Management Corp., the activist investor pushing for the resources company to shed at least some of its oil-and-gas assets and boost shareholder returns.

Elliott said today: "Current management's response to the value unlock plan has been misconceived, wholly unconvincing and a disservice to BHP's owners - underestimating the groundswell of dissatisfaction among shareholders".

Elliott, run by billionaire Paul Singer, has accused BHP of adopting a "do nothing" approach to its three-pronged proposal.

Elliott, which claims a 4.1 per cent stake in BHP's UK-listed unit, says it prefers a full or partial demerger of the unit, but recognises there are other possible solutions to unlock the latent value of the petroleum business.

In a subsequent letter and accompanying presentation provided to BHP today, Elliott reveals extremely broad and deep-rooted shareholder support for proactive steps to be taken by BHP management to review its petroleum business. Our path is deliberate, with value and returns at the center of everything we do.

BHP first flagged the notion of rigs returning to its shale acreage in February, and the company flagged in April that it was looking to sell some of its lesser shale assets like the Hawkville and Fayetteville shales in South Texas and Arkansas respectively.

BHP has destroyed about $31 billion in value through its foray into USA shale and failed petroleum exploration as well as a further $9 billion in poorly timed share buybacks, Elliott said in a letter to the company's board.

BHP was also reportedly set to meet with members of Elliott on the sidelines of a conference this week.

BHP has said it would review the plans and respond.

Mackenzie gave a speech to the conference on Tuesday where he reiterated his confidence in boosting the value of the company by up to 50% and nearly double the return on capital, through cutting costs and carefully managing assets.

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He said BHP now has major growth projects valued at up to US$25bn, offering potential average returns of more than 16% at consensus prices. The use of technology could add another $12 billion.

In its letter, Elliott also shifted a push for BHP to spin off its US oil and gas assets, which include activities in the Gulf of Mexico and vast onshore shale acreage. While Elliott showed that BHP has invested $8 billion in petroleum exploration since 2002, and with little to nearly no return, one unfortunate reality may simply be that BHP can not cost-effectively break all of the assets out with the current energy market prices.

BHP has said the costs of scrapping its dual-listed structure significantly outweigh the benefits.

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